HookThe exposé that cost Boohoo £1.5 billion in a week
In July 2020 The Sunday Times sent an undercover reporter into a Leicester factory making clothes for Boohoo, the online fast-fashion group behind PrettyLittleThing and Nasty Gal. He was offered £3.50 an hour — the legal minimum for over-25s was then £8.72 — in a workplace with barely any Covid protection, at the height of the pandemic. Boohoo did not own the factory; it sat two links down the supply chain. Investors did not care about the distinction. Within a week more than £1.5 billion had been wiped off Boohoo's stock-market value, and Next, ASOS, Amazon and Zalando had pulled its brands from their platforms. An independent review by Alison Levitt QC later found the allegations 'substantially true' and the company's monitoring of its suppliers inadequate.
Every leaf of 3.2 is inside that story. A business built on e-commerce (3.2.1) was punished for an ethical failure (3.2.2) that was also a legal one — minimum-wage law reaching through its supply chain (3.2.5). Its £5 dresses existed because of globalised sourcing and brutal fast-fashion competition (3.2.4, 3.2.6), and the lockdown boom that preceded the scandal was pure economic climate (3.2.3). This section is about the forces a business does not control: technology, ethics, the economy, the world, the law and its rivals. AQA will hand you a business and ask which force is biting it, in which direction, and what it should do about it.
MechanismTechnology — the shop moved into the customer's pocket
E-commerce — buying and selling online — rewires almost every number in a business. Reach: a seller in a spare room can serve customers in Texas from day one. Costs: no high-street rent or shop staff, but websites, warehouses and delivery drivers are not free — costs move, they do not vanish. Hours: the shop never shuts. Data: every click, basket and abandoned checkout is free market research. And competition: when rivals are one tab away, price comparison is instant and loyalty gets thinner — which is why firms fight to own the customer's habit. Roughly nine in ten of Domino's UK orders now arrive digitally, and the app's saved-order convenience is precisely a weapon against switching.
Digital communication — email, social media, live chat, video calls — makes contact with customers, staff and suppliers near-instant and near-free, and lets a small firm market itself globally for the cost of a phone. The same channels amplify failure: a bad experience that once reached one dinner table now reaches thousands through reviews and reposts within hours.
The evaluation AQA rewards is that technology is not automatically profitable. Primark refused transactional online retail for years because a £3 t-shirt cannot absorb picking, delivery and — the killer — returns; its compromise, trialled from 2022, was click-and-collect into stores, where the customer does the last mile. Whether e-commerce raises profit depends on the price point, how often the product is returned, and who pays for delivery. 'Put it online' is a strategy, not a spell.
CaseEthics and the environment — when doing the right thing costs money
Business ethics means doing what is morally right beyond what the law demands: how workers are treated — including workers employed by your suppliers, as Boohoo learned — honesty in marketing, fair dealing with suppliers, responsible sourcing. Ethical choices usually cost something up front: paying above the minimum, auditing factories, buying certified cotton. The pay-off is trust; the penalty for neglecting it is severe. Boohoo went on to spend years and tens of millions of pounds on its 'Agenda for Change' supplier-reform programme — far more than careful monitoring would ever have cost.
Environmental influences work the same way. Waste, packaging, emissions and pollution used to be someone else's problem; now customers, investors and pressure groups price them in. Regulation nudges too: England's plastic-bag charge — 5p in 2015, 10p and extended to every retailer from 2021 — cut single-use bag sales at the main supermarkets by over 95%. Green credentials have become a marketing asset in their own right, which is why the competition regulator now polices 'greenwashing': environmental claims a business cannot back up.
The exam angle is the trade-off. Ethical and environmental behaviour raises costs in the short run and protects revenue, recruitment and brand in the long run. Whether it pays depends on how visible the business is, what its customers care about, and how likely a failure is to be exposed. For a social-media-native fashion brand selling to Gen Z, the answer turned out to be: very.
DataThe economic climate — three dials the business cannot turn
AQA names the forces: interest rates, employment levels and consumer spending. An interest rate is the cost of borrowing and the reward for saving. When the Bank of England raised its base rate from 0.1% in December 2021 to 5.25% by August 2023 — fourteen rises in a row, chasing inflation that peaked at 11.1% — every variable-rate business loan, every overdraft and every household mortgage got dearer at once. Firms postpone investment; mortgaged households lose disposable income; and the first spending to go is big-ticket and credit-financed. DFS, which sells most of its sofas on interest-free credit, cut its profit guidance repeatedly through 2023–24 as customers postponed exactly that purchase.
Employment cuts both ways. Low unemployment — the UK spent most of the 2020s near 4% — means confident customers but scarce, expensive staff; high unemployment means the reverse: easier, cheaper recruitment but weaker sales. Consumer spending ties the section back to 3.1: in a downturn, objectives slide from growth to survival, discounters gain as shoppers trade down, and sellers of postponable luxuries brace. The skill is matching the dial to the business in front of you — a rate rise is a disaster for a housebuilder and close to irrelevant for a discount bakery chain.
Follow one rate rise into one living room. A family has a £200,000 variable-rate mortgage. Rates rise from 2% to 4%: annual interest goes from roughly £4,000 to £8,000 — about £333 a month of disposable income gone. Multiply across millions of households and you have the demand shock that hits sofa, kitchen and holiday sellers first. Now the supply side: a furniture retailer carrying a £500,000 variable-rate loan pays £10,000 a year more in interest — the new delivery vans it now will not buy. Same rate rise, two separate wounds: costlier borrowing AND poorer customers. Naming both effects, then judging which matters more for the business in the question, is what the top level of the mark scheme looks like.
ModelGlobalisation and exchange rates — priced in someone else's currency
Globalisation is the tightening interconnection of the world's economies: UK businesses selling abroad (exports), buying abroad (imports), and multinationals operating across borders — Nissan's Sunderland plant, Britain's biggest car factory, exports most of what it builds. The opportunities are bigger markets and cheaper inputs. The threats are sharper competition arriving here — Shein fights Boohoo for the same customers from China — and supply chains long enough to snap, as the pandemic proved.
The exchange rate is the price of one currency in terms of another, and it moves daily — the pound touched an all-time low of about $1.03 after the September 2022 mini-budget. The mnemonic is SPICED: Strong Pound, Imports Cheap, Exports Dear. A strong pound is good news for a business that imports stock or components, and bad news for one selling to foreign customers; a weak pound reverses both. No movement in the currency is simply 'good for business' — it depends which side of the border a firm's costs and customers sit on, and that identification is the application mark.
A Yorkshire bike-maker sells a £1,500 bike to American customers and buys $6,000 of Taiwanese components per batch, priced in dollars. At £1 = $1.50: the bike costs Americans £1,500 × 1.50 = $2,250, and the components cost $6,000 ÷ 1.50 = £4,000. The pound then weakens to £1 = $1.20. The bike now costs $1,800 — a fifth cheaper, so US sales rise. But the components now cost $6,000 ÷ 1.20 = £5,000 — £1,000 more per batch. One firm, one currency movement, opposite effects. The judgement: if export revenue dominates, the weak pound helps on balance; if imported parts dominate costs, it hurts. Multiply going out of pounds, divide coming back, and sanity-check the direction — a weaker pound should always make British goods look cheaper to foreigners.
MechanismLegislation — the rules of the game, and the price of breaking them
Two families of law carry the marks here. Employment law sets a floor under how workers are treated: the National Living Wage (£12.21 an hour for workers 21 and over from April 2025, a floor that has been rising sharply), the Equality Act 2010 (no discrimination in hiring, pay or promotion on grounds such as age, sex, race or disability) and the Health and Safety at Work Act 1974 (safe conditions, training and equipment). Consumer law protects buyers: under the Consumer Rights Act 2015, goods must be of satisfactory quality, fit for purpose and as described — and faulty goods can be rejected for a full refund within 30 days.
Compliance costs real money. Every rise in the legal wage floor lands directly on the wage bills of retail, hospitality and care businesses; safety training is paid for in hours as well as pounds; returns policies cost margin. But the cost of breaching the law is worse: fines, compensation claims, government naming-and-shaming for underpayment, and reputational damage that outlives any penalty — Boohoo's crisis was, at its core, an alleged minimum-wage breach two links down its supply chain.
The evaluation examiners reward: legislation also levels the playing field. A business undercutting rivals by underpaying staff or skipping safety is not competing, it is cheating — and when the law raises every rival's costs together, much of the burden can be passed into prices rather than absorbed in profit. The firms genuinely squeezed are the ones whose rivals sit outside UK law.
CaseCompetition — Aldi sets Tesco's prices now
A competitive market is one where many businesses chase the same customers. Competition presses prices down and standards up: to keep customers a business must offer keener prices, better quality, wider choice or better service than the alternative — while its rivals try to do the same. That is also why competitive markets are ruled by uncertainty and risk: rivals' next moves, shifting tastes and new entrants are all invisible from head office, so every decision is made on incomplete information.
Watch it work in groceries. Aldi and Lidl's price-led model grew through every squeeze in consumer incomes, and in September 2022 Aldi overtook Morrisons to become the UK's fourth-largest supermarket. Tesco's response was textbook: 'Aldi Price Match' on hundreds of everyday lines from 2020, plus Clubcard Prices to reward loyalty — matching the discounters exactly where comparison is fiercest while defending margin everywhere else. Sainsbury's launched its own Aldi Price Match within a year; M&S moved the opposite way, competing on quality and range where discounters cannot follow.
That is the response menu AQA expects you to know: cut costs so you can cut prices; differentiate with a USP; improve quality or service; or target a different segment altogether. And the honest evaluation: matching a discounter's prices with a superstore's cost base squeezes profit margins — which is exactly why competition forces the operations discipline you will meet in section 3.3.
VocabularyKey terms the mark scheme pays for
TrapsMisconceptions that cost marks
ExamWhat examiners want
AQA marks the papers on three assessment objectives — AO1 knowledge (35%), AO2 application (35%), AO3 analysis and evaluation (30%) — and 3.2 is where application is won or lost, because every influences question comes attached to a business. A generic paragraph about interest rates scores AO1 only; the marks arrive when you connect the rate to this firm's customers ('sofas bought on credit') and this firm's costs ('the variable-rate loan on its warehouse').
On 6-mark analyse questions, build one chain and follow it all the way to profit: base rate rises → customers' mortgage payments rise → disposable income falls → big-ticket orders postponed → revenue falls while fixed costs stay → profit falls. Each arrow is an analysis mark; stopping halfway leaves marks on the table. On 9-mark evaluate questions, the external influences are gloriously two-sided — a weak pound helps the exporter and hurts the importer, legislation raises costs and levels the playing field, competition squeezes margins and sharpens the offer — so argue both sides, then commit with a condition: 'On balance the weak pound benefits the firm because most of its revenue is export sales; if imported components grow as a share of its costs, that judgement reverses.' Conditional conclusions are what the top level of the mark scheme describes.
For exchange-rate arithmetic: multiply to go from pounds into the foreign currency, divide to come back, and sanity-check the direction — if the pound weakened, foreign buyers should be paying less for British goods. Formula, substitution, answer with the currency symbol. Method marks survive arithmetic slips; naked numbers do not.